Only
insurers and insurance intermediaries, i.e. insurance
agents and insurance brokers, are regulated in
Hong Kong.

Q2

What
is the law regulating the insurance industry and
who is responsible for the regulation?

A2

The
relevant legal framework for the regulation of
insurers is provided by the Insurance
Companies Ordinance (Cap.41), and its subsidiary
legislation including Insurance Companies (Determination
of Long Term Liabilities) Regulation, Insurance
Companies (Margin of Solvency) Regulation and
Insurance Companies (General Business) (Valuation)
Regulation. The same Ordinance also provides a
legal backing for the self-regulatory system of
insurance intermediaries. The Commissioner of
Insurance, in his role as the Insurance Authority,
is responsible for the regulation of the insurance
industry.

Q3

What
is the principal function of the Insurance Authority
("IA")?

A3

The
principal function of the IA is to regulate the
insurance industry for the protection of existing
or potential policy holders and the promotion
of the general stability of the insurance industry.
He is however not involved with the daily operations
of an insurer, including determination of the
terms and conditions of insurance policies or
the fixing of premium rates. The IA works closely
with the insurance industry to encourage the provision
of better services to the insuring public and
greater transparency in an insurer's operations.
For example, the IA has been working closely with
the insurance industry to implement the Insurance
Intermediaries Quality Assurance Scheme with
a view to enhancing the professional standard
of insurance intermediaries. Under the Scheme,
insurance intermediaries, their responsible officers/chief
executives and technical representatives are required
to pass the Insurance Intermediaries Qualifying
Examination conducted by the Vocational
Training Council, unless otherwise exempted,
before they can be registered or authorized as
such. Thereafter, they are required to attend
continuing professional development programmes.

Q4

How
many insurers are authorized in Hong Kong and
how are they distributed by types of insurance
business and countries of incorporation?

A4

As
at 31 March 2015, 158 insurers (approximately
60% general business insurers, 28% long term business
(or life) insurers and 12% composite insurers)
were authorized in Hong Kong. Of these insurers,
86 were companies incorporated in Hong Kong while
the rest come from 22 different countries/regions,
with Bermuda (12) and UK (12) taking the lead, to be followed
by USA (11).

Q5

How
many insurance brokers and agents are there in
Hong Kong?

A5

As at 31 March 2015, there were 673 authorized
insurance brokers and 9,961 registered chief
executives/technical representatives. For insurance
agents, there were 49,431 appointed insurance
agents (i.e. 2,460 insurance agencies and 46,971 individual agents) and 27,886 responsible officers/technical
representatives.

Q6

What
is the size of insurance business in Hong Kong
and how are they distributed between General and
Long Term Business?

A6

Total
gross premiums of insurance business in 2013 amounted
to HK$299.5 billion.

Insurance Business

2011
HK$m

2012
HK$m

2013
HK$m

General Business
- Gross Premium

34,835

39,205

41,798

Long Term Business
- Office Premium

198,915

224,124

257,717

Total

233,750

263,329

299,515

Q7

What
are the major classes of insurance business and
their respective market share?

A7

For
general business, accident and health (26%), general liability (26%), property
damage (21%) and motor
vehicle (11%) business are the major lines of
business in terms of gross premiums for 2013.

For long term business, individual life business
(93%) is the most important line in terms of
office premiums for 2013, to be followed by
retirement scheme management (3%). As at the
end of 2013, 10.4 million individual
life policies were in force.

Q8

What
are insurance agents, their responsible officers
and technical representatives?

A8

An
insurance agent means as a person who holds himself
out to advise on or arrange contracts of insurance
in or from Hong Kong as an agent or subagent of
one or more insurers. A person shall not hold
himself out as an insurance agent unless he has
been properly registered. Besides, a person shall
not act both as an insurance agent and broker
at the same time.

A responsible officer of an insurance
agent generally means a person who is responsible
for the conduct of the insurance agency business
of such insurance agent. For detailed definition
of responsible officer, you may refer to the Code
of Practice for the Administration of Insurance
Agents issued by The
Hong Kong Federation of Insurers. Their telephone
number is (852) 2520 1868.

A technical representative of
an insurance agent means a person, not being an
insurance subagent, who provides advice to a policy
holder or potential policy holder on insurance
matters for such insurance agent, or arranges
contracts of insurance in or from Hong Kong on
behalf of that insurance agent.

Q9

How
are insurance agents, their responsible officers
and technical representatives being regulated?

What
are insurance brokers, their chief executives
and technical representatives?

A10

An
insurance broker means a person who carries on
the business of negotiating or arranging contracts
of insurance in or from Hong Kong as the agent
of the policy holder or potential policy holder
or advising on matters related to insurance agents.
A person shall not hold himself out as an insurance
broker unless he has been properly authorized.
Besides, a person shall not act both as an insurance
agent and broker at the same time.

A chief executive of an insurance
broker generally means a person who is responsible
for the conduct of the insurance broking business
of such insurance broker. For detailed definition
of chief executive, you may refer to the "Minimum
Requirements" for insurance brokers specified
by our Office.

A technical representative of
an insurance broker means a person who provides
advice to a policy holder or potential policy
holder on insurance matters for such insurance
broker, or negotiates or arranges contracts of
insurance in or from Hong Kong on behalf of that
insurance broker for a policy holder or potent
of policy holder.

Q11

How
are insurance brokers, their chief executives
and technical representatives being regulated?

What
is the Mainland and Hong Kong Closer Economic Partnership
Arrangement ("CEPA")? What are offered to the insurance
industry under CEPA? For the purposes of CEPA, how
to apply for a Certificate of Hong Kong Service
Supplier ("HKSS")?

A12

Meaning
of CEPA

The CEPA is an arrangement whereby a form of free
trade area is established between the Mainland
and the Hong Kong Special Administrative Region
("HKSAR"). The CEPA covers three broad areas, namely trade
in goods, trade in services, and trade and investment
facilitation.

Terms of CEPA - Insurance Industry

In respect of the insurance sector, the Mainland accords Hong Kong service suppliers the following concessions:

With effect from 1 January 2004:

To allow groups formed by Hong Kong insurance
companies through re-grouping and strategic
mergers to enter the Mainland insurance market
subject to established market access conditions
(total assets held by the group of over US$
5 billion; more than 30 years of establishment
experience attributable to one of the Hong Kong
insurance companies in the group; and a representative
office established in the Mainland for over
2 years by one of the Hong Kong insurance companies
in the group).

The maximum limit of capital participation
by a Hong Kong insurance company in a Mainland
insurance company is 24.9%.

To allow Hong Kong residents with Chinese
citizenship, after obtaining the Mainland's
professional qualifications in actuarial science,
to practise in the Mainland without prior approval.

To allow Hong Kong residents, after obtaining
the Mainland's insurance qualifications and
being employed or appointed by a Mainland insurance
institution, to engage in the relevant insurance
business.

With effect from 1 January 2008:

To permit the setting up of an examination centre in Hong Kong for the Mainland qualifying examinations for insurance intermediaries.

To allow Hong Kong insurance brokerage companies to set up wholly-owned insurance agency companies in Guangdong Province (including Shenzhen) on a pilot basis. The place of operation should be in Guangdong Province (including Shenzhen), and the applicant must fulfill the following criteria:

The applicant should have been operating insurance brokerage businesses in Hong Kong for over 10 years;

The applicant's average annual business revenue for the past 3 years before application should not be less than HK$500,000 and the total assets as at the end of the year before application should not be less than HK$500,000;

Within 3 years before application, there has been no serious misconduct and record of disciplinary action; and

The applicant should have set up a representative office in the Mainland for over one year.

To support Hong Kong insurance companies to enter the market through setting up business institutions or capital participation, so as to participate and share in the development of the Mainland insurance market. To enhance bilateral cooperation in areas such as development of insurance products, business operation and operational management, etc.

With effect from 29 August 2013:

To actively support qualified Hong Kong insurers to take part in compulsory traffic accident liability insurance business in the Mainland. Applications made by Hong Kong insurers will be actively considered and facilitation will be provided in accordance with relevant rules and regulations.

With effect from 1 March 2015:

In respect of the mode of “commercial presence” in Guangdong Province, national treatment will be applied to service suppliers of the Hong Kong insurance sector except the following reserved restrictive measures:

Hong Kong insurance companies and their groups formed through re-grouping or strategic mergers which enter the Mainland insurance market must fulfil the following criteria:

Total assets held by the group of over US$5 billion; more than 30 years of establishment experience attributable to one of the Hong Kong insurance companies in the group; and a representative office established in the Mainland for over 2 years by one of the Hong Kong insurance companies in the group;

The place of their domicile is having a robust insurance regulatory system; and the insurance companies are under effective supervision by the relevant authority where the insurance companies are domiciled;

Having met the solvency margin standard of the place where they are domiciled;

Their application has had the agreement of the relevant authority of the place where they are domiciled;

Reasonable corporate governance; and stable risk management system;

Healthy internal control system; and effective information management system; and

Good operating condition; and having no record of significant violation of laws and regulations.

The maximum limit of shareholding percentage of a Hong Kong insurance company in a Mainland insurance company is 24.9%. Foreign financial institutions to invest in shares of insurance companies must fulfil the following criteria:

A good and stable financial condition with continuous profit making record for the recent three consecutive accounting years;

The total assets as at the end of the most recent year shall be not less than US$2 billion;

Having long term credit rating of A or above given by international credit agencies in the recent three years;

Having no records of significant violation of laws and regulations for the recent three years; and

Having fulfilled the requirements of prudential supervision standards of the financial regulators where they are domiciled.

An insurance company which carries on life insurance business in the Mainland and is jointly established by foreign insurance companies and Mainland domestic companies and/or enterprises (hereinafter called “jointly-owned life insurance company”) shall have no more than 50% of its total share capital coming from foreign source. Foreign insurance companies having shares in the jointly-owned life insurance company, directly or otherwise, whose proportion of share capital shall not exceed the limit as aforesaid.

The total equity owned by Mainland domestic insurance companies in an insurance asset management company shall be not less than 75%.

Having been operating insurance agency business for over 10 years; the applicant's average annual business revenue for the past 3 years before application shall not be less than HK$500,000 and the total assets as at the end of the year before application shall not be less than HK$500,000; and

Within 3 years before application, there has been no serious violation of regulations and record of disciplinary action.

The applicant shall have been operating insurance brokerage business in Hong Kong for over 10 years;

The applicant's average annual business revenue for the past 3 years before application shall not be less than HK$500,000 and the total assets as at the end of the year before application shall not be less than HK$500,000; and

Within 3 years before application, there has been no serious violation of regulations and record of disciplinary action.

Except otherwise approved by the China Insurance Regulatory Commission, foreign insurance companies are not allowed to be involved in the following activities with their related enterprises:

Inward or outward reinsurance businesses; and

Purchase or sale of assets or other transactions.

Those foreign insurance companies having the approval to carry on inward or outward reinsurance businesses with their related enterprises shall submit the materials as required by the China Insurance Regulatory Commission.

Regarding the mode of “cross-border services”:

To encourage Guangdong insurance companies to cede their business to Hong Kong insurance or reinsurance companies with RMB as the settlement currency.

To encourage Hong Kong insurance companies to continue expanding the scale of their outward reinsurance business placements to the Mainland (including Guangdong Province) reinsurance companies.

To allow Guangdong insurance companies that fulfil regulatory requirements to appoint Hong Kong insurance companies to provide RMB insurance policies selling services in Hong Kong. These insurance companies must strictly follow the requirements of relevant insurance laws, regulations and codes, and their businesses being carried on in a regulated manner with a view to enhancing mutual development of insurance markets.

For the purposes of the CEPA, the main qualifying criteria for HKSS who provides services in the form of juridical person are:

The service supplier should engage in substantive
business operations in Hong Kong. In other words

the nature and scope of the services provided in Hong Kong by a Hong Kong service supplier should meet the requirements in Annexes 4 and 5 to the CEPA Main Text, and any restrictive requirements applicable to the nature and scope of the business of foreign investment entities in the laws, regulations and administrative regulations of the Mainland shall apply;

it should have engaged in substantive
business operations for 5 years or more;

during the period of substantive business
operations in Hong Kong, it should have
paid profits tax in accordance with the
law;

it should own or rent premises in Hong
Kong to engage in substantive business operations;
and

among the staff employed by it in Hong
Kong, more than 50% should be residents
staying in Hong Kong without limit of stay,
and people from the Mainland staying in
Hong Kong on One Way Permit.

Application for Certificate of HKSS

Application for a Certificate of HKSS should be
made to the Trade and Industry Department ("TID")
of the HKSAR. The TID has promulgated the Notice
to Service Suppliers No. 3/2009 which sets out
the detailed application procedures for Certificate
of HKSS. Please visit the website:
http://www.tid.gov.hk/english/cepa/ for the
Notice or further details on CEPA.

Q13

What
are the application procedures/requirements for
providing services in the Guangdong Province under
CEPA?